Last fiscal year, UT excused about $9.7 million in tuition revenue for 1,034 student veterans and their families as part of the Texas Hazlewood Act tuition exemption, according to a Legislative Budget Board report.

State lawmakers are working to reduce losses to university revenue and the number of students who qualify for the exemption through House Bills 3566 and 3572, among others. The two bills were heard and left pending in committee Wednesday.

“It is clear that the burden we are asking our state institutions to bear is unsustainable,” said Rep. John Zerwas (R-Richmond), member of the House Higher Education Committee and author of HB 3572.

The Hazlewood Act is a state-mandated tuition exemption of up to 150 semester credit hours for certain veterans residing in the state. If a veteran does not use the credit hours, they may be transferred to his or her spouse or children.

The two bills heard in the House Higher Education Committee would limit the exemption to those who have continuously lived in the state for eight-years or were born in Texas. they would also offer 120 hours of course credit rather than 150, among other changes.

“I think all of us … want to continue the Hazlewood exemption in some form or fashion,” said Rep. Rick Miller (R-Sugarland), author of HB 3566. “It’s greatly beneficial to our veterans and families, so I think we are looking at a way to do that that is reasonable and cost effective.”

The residency requirement would replace a current rule that requires veterans to have enlisted in Texas to receive Hazlewood benefits. The act is under scrutiny after a U.S. district judge found the act’s enlistment requirement unconstitutional in the case of an individual student.

“If the decision is upheld through the appeals process, it could signify an expansion that would open the door to many veterans,” Zerwas said.

Brantley Starr, deputy attorney general for legal counsel, said the eight-year-residency change may be found constitutional.

Prior to the Hazelwood Legacy Act, which was passed in 2009, family members could receive the exemption if the veteran was deceased or permanently disabled as a result of his or her service. The Legacy Act expanded the exemption to all qualifying children of veterans.

The Legacy Act led to an increase of about $144 million in costs for universities, according to the budget report.

“As much as I think I have earned my benefits — and I’ve done a lot, and I’ve given a lot to earn them — I also understand that they have competing interests, and they have a budget and a balance sheet,” said Dan Hamilton, international relations and global studies junior and a veteran using the Hazlewood exemption.

Hamilton said he thinks that if the state must make cuts to the act, they should prioritize keeping benefits for veterans, not their families.

“As much as it would be nice to pass that benefit down to my kids, I think the obligation the state has is specifically to the veteran,” Hamilton said.

The bills, in their current form, do not remove the legacy program.

According to Zerwas, Texas is one of two states, the other being Illinois, to offer full tuition exemptions to veterans. Zerwas said Texas is the only state to offer full benefits to their children.

At UT there are 41 dependents and 818 legacy students who would be eligible for the exemption without the legacy act using the act, according to the report.

“Veterans are generally eligible for Post-9/11 [GI Bill], so more dependents [and legacy students] end up using Hazlewood than veterans,” said Jeremiah Gunderson, interim director for Student Veteran Services.

Gunderson said he is not sure how and if the Hazlewood Act will change this legislative session, but he and the department will adjust to help student-veterans understand the law moving forward.

“Obviously, different stakeholders within the University have different interests as far as the legislation goes,” Gunderson said. “I’m just here to advocate for veterans and to help our veterans and dependents the best I can.”

Governor Rick Perry’s call for Texas agencies to cut spending over the next two years has prompted a statewide search for fiscal inefficiencies, a search UT will undertake in the next few months. It is currently unclear how these reductions will affect universities across Texas.

Perry and the Legislative Budget Board, a committee of the Texas Legislature that oversees budget analyses and recommendations, sent a letter June 4 directing Texas agencies to keep their 2014-15 budgets below the 2012-13 biennium expensed and budget total. It also called on state agencies to identify proposals to further reduce budgets by 10 percent. These proposals will ultimately be decided upon when the budget board meets in January.

Mary Knight, associate vice president of the UT budget office, said a 10 percent reduction for UT would amount to a $59 million cut over two years. Knight said it is unclear how UT will be affected if the Legislative Budget Board approves the reduced budget proposals.

Officials in the governor’s office said every agency in Texas is being asked to search for inefficiencies within their budgets and to propose reductions.

Knight said UT has an ongoing five-year budget planning process that involves deans from respective college and vice presidents who collaborate with the president and provost to determine strategic priorities for each unit of the University.

“At this point, the reductions are part of a planning process for next legislative session,” Knight said. “Until the legislative session begins in January of 2013, we will not have the details of how this may impact UT Austin.”

Michael Morton, president of the Senate of College Councils, said it is difficult to determine where the cuts will be made within the University at this point if the Legislature asks state institutions to cut their budgets.

In the 2011 legislative session, the Texas Legislature cut 17.5 percent of UT’s budget, or $92 million, over two years. Morton said cuts made in the last budget cycle resulted in the loss of valuable administrators and staff members. He is a member of the President’s Student Advisory Council, a group of 12 students who guide the University president in matters relating to student interests, including finances and tuition.

Morton said UT is currently already operating at minimal costs, making additional cuts especially harmful.

“There’s a lot of little things that I don’t think people realize are affected by the cuts,” Morton said. “It does take a toll on people and it does take a toll on the university because we’re receiving less and less state funding.”

A 2.6 percent tuition increase proposed by President William Powers Jr. was denied by the UT Board of Regents in May, which Morton said would have made up some of the ground lost by budget cuts.

“I supported the tuition increase of 2.6 percent,” Morton said. “It was a modest increase for the situation that we, as an institution, are in. Ultimately, I thought it was better in the long run for the institution and better for students. Obviously no one wants a tuition increase in an already poor economic climate, which is why state funding is so critical and why we need to continue to get that message heard at legislature.”

Lucy Nashed, spokeswoman for the governor’s office, said Perry has asked universities to avoid raising tuition in the future if the reduced budget proposals are approved. Nashed said Perry has been very vocal about keeping tuition rates frozen.

“Tuition shouldn’t be the first place universities look to raise to revenue,” Nashed said. “He’s still calling on universities to find deficiencies. There’s still a lot that can be done before tuition needs to be increased.”

Nashed said the governor’s overarching vision for the state is to maintain fiscal discipline and to streamline government operation. She said not raising taxes for Texas residents is one of Perry’s goals outlined for this upcoming budget cycle.

“He has asked lawmakers to keep this [goal] in mind, and now we’re just asking agencies to take a look at their budgets and see what savings they could find,” Nashed said. “It’s basically just kind of setting the stage.”

Preservation of the state’s Economic Stabilization Fund is another of Perry’s priorities, Nashed said. Often referred to as the Rainy Day Fund, it is set aside for state emergencies such as natural disasters. According to the Legislative Budget Board’s 2012-13 revenue outlook, the Rainy Day Fund was at a balance of $8.2 billion and is projected to increase to $9.6 billion by the end of the 2013 fiscal year.

After growing concerns over the state’s ability to pay for health care services for its inmates, the University’s Board of Regents has taken a solid stance on providing health care for the state’s correctional facilities — pay the bills or find another provider.

The UT Board of Regents approved a new agreement Monday between the University of Texas Medical Branch and the Texas Department of Criminal Justice guaranteeing UTMB will be paid the remaining $45 million for the services it provides to inmates. If left unpaid, the agreement laid out measures to transition UTMB’s services out of the facilities or terminate them completely. UTMB’s total cost of services for the 2012 fiscal year is $430.5 million, including the $6.3 million left unpaid from the previous two year period, according to UTMB spokesman Raul Reyes. The state currently still owes UTMB $45 million, he said.

The agreement demands the Texas Department of Criminal Justice request $45 million from its 2013 fiscal budget for health care from the Legislative Budget Board to cover the money it still owes UTMB. Under the new agreement, UTMB will continue to provide health care services to the state for the remainder of the 2012 fiscal year, which ends in August, and will continue negotiations as to whether UTMB will provide care in 2013.

UT System spokesman Anthony de Bruyn said this was not the first time concerns about TDCJ’s ability to pay have been raised to the Board of Regents.

“The Board approved an extension of the contract last month and prior to that concerns have been raised,” de Bruyn said.

He said the Board was satisfied with the agreement both parties have come up with.

Reyes said that out of UTMB’s 11,000 employees, approximately 3,000 of them work in the state’s prison facilities. Both entities have been working together to provide health care to inmates since 1994.

“For years, we would get supplemental appropriations after we had provided care, and they were not always enough to cover the bill,” he said.

Reyes said UTMB always believed the new agreement with TDCJ would be approved.

“Throughout all this, everyone needs to know that patient care was never interrupted,” Reyes said. “We continued to provide care at one of the lowest costs throughout the nation, and we’re thankful that a solution has been worked out to make sure that the health care is continued.”

TDCJ spokesman Jason Clark said UTMB is the primary health care provider for 87 state facilities consisting of 120,000 inmates. Texas Tech University Health Science Center also provides health care for the state. He said biennial agreements are renegotiated based on legislative appropriations and renegotiated after each legislative session.

Clark said the request to the Legislative Budget Board for $45 million from state health care service’s budget for the fiscal year of 2013 has not been approved by the Legislative Budget Board.

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The latest round of 3-percent budget cuts to state agencies could mean a reduction of about $9 million in UT’s state funding. But University officials could not say a day after the cuts were announced which jobs or programs might be vulnerable.

The University received $300 million in state funding for the 2010-2011 biennium.

Leaders of the Texas House and Senate announced further budget cuts after setting the state’s spending limit for the next legislative session at a meeting of the Legislative Budget Board on Monday. About 14 percent of the University’s overall budget comes from state funding, compared to 47 percent in 1985.

Kevin Hegarty, UT’s chief financial officer, said the University does not yet have a plan to deal with the new budget cut, but there will likely be more jobs lost.

“[Our response] will be as methodical and thoughtful as it possibly can, the worst thing we can do is just react,” he said.

UT cut $14.6 million from its budget earlier this year — mostly from administrative and non-academic areas — after legislative leaders asked most state agencies to cut 5 percent of their budgets. By comparison, the School of Architecture’s budget is $8 million. Months later, they asked for cuts of 10 percent to state agencies’ 2012-13 budgets.

Texas universities’ only option to avoid dropping jobs and programs is to raise tuition — a choice higher education leaders will be reluctant to make because of political constraints and relationships with state leaders, said Eva DeLuna Castro, a budget analyst with the progressive think tank Center for Public Policy Priorities.

Castro said the cuts in state funding for higher education will also mean less state financial aid and that thousands of entering, eligible students will not obtain the TEXAS Grant and several other grants. The Texas Higher Education Coordinating Board in September proposed cuts that would drop grants for 24,000 first-time recipients of the TEXAS Grant program.

During a September Legislative Budget Board meeting, officers asked UT System Chancellor Francisco Cigarroa and several UT System presidents if they would prefer to cut their funding for special items, such as the McDonald Observatory or formula funding, which makes up most of UT’s state funding.

Most of the presidents responded that their special items are crucial to the growth of their institutions.

UT budget director Mary Knight said the University’s special items include large research units that benefit Texas, such as the Bureau of Economic Geology, which provides research on energy and environmental issues in the state.

UT is still going through the process of planning for the possible 10 percent cut, and if the new budget cuts affect UT during this fiscal year, the budget planning process would be rushed, Knight said.